Who provides NHR funding?

Under the National Health Reform Agreement (the Agreement or NHRA), the states, territories and the Commonwealth are jointly responsible for funding public hospital services, using activity based funding where practicable and block funding in other cases. (NHRA 7a)

Under the Agreement, the scope of public hospital services that are funded on an activity or block grant basis and are eligible for a Commonwealth funding contribution currently includes:

  • All admitted and non-admitted services
  • All emergency department services provided by a recognised emergency department
  • Other outpatient, mental health, sub-acute services and other services that could reasonably be considered a public hospital service.

Public hospitals will continue to receive funding from other sources, including the Commonwealth, states and territories, and third parties for the provision of other specific functions and services outside the scope of the Agreement, for example dental services, primary care, Home and Community Care, residential aged care and pharmaceuticals.

For more information:

  • Commonwealth Government NHR funding

    Commonwealth Government NHR funding

    Under the Agreement, Commonwealth NHR funding replaced the National Healthcare SPP in Schedule D of the Intergovernmental Agreement on Federal Financial Relations (IGA FFR) from 1 July 2012.

    The Commonwealth funds:

    • Hospital services provided to public patients in a range of settings and funded on an activity basis
    • Hospital services provided to eligible private patients in public hospitals
    • Hospital services provided to patients in public hospitals better funded through block grants, including relevant services in rural and regional communities
    • Teaching and training functions funded by states and territories undertaken in public hospitals or other organisations (such as universities and training providers)
    • Research funded by states and territories undertaken in public hospitals
    • Public health activities managed by states and territories.

    (NHRA A1)

  • State or territory government NHR funding

    State or territory government NHR funding

    The state or territory government contribution to the funding of public hospital services and functions is calculated on an activity basis or provided as block funding.

    As the system managers of the public hospital system, states and territories determine the amount they pay for public hospital services and functions and the mix of those services and functions, and they meet the balance of the cost of delivering public hospital services and functions over and above the Commonwealth contribution. (NHRA A59, A60)

  • Cross-border funding for interstate patients

    Cross-border funding for interstate patients

    When a resident of one state receives hospital treatment in another state, the 'resident state' compensates the treating or 'provider state' for the cost of that care via a 'cross-border' payment.

    Commonwealth activity based funding contributions through the National Health Funding Pool to each state or territory are on a 'provider state' basis and hence already reflect the Commonwealth share of the costs of this cross-border activity. The cross-border component of Commonwealth funding, based on an estimate of expected services, will be separately identified in Commonwealth budget papers from 2013-14 onwards.

    For state and territory activity based funding contributions, the 'resident state' is required to meet the state portion of the cost of services where its resident receives hospital treatment in another state or territory. The resident state makes 'cross-border' funding contributions to the provider state's pool account, and these funds are used by the provider state as part of its activity based funding payments to local hospital networks. Cross-border agreements, including the scope of services and payment arrangements, can occur bilaterally between all states. (NHRA A88a, A89, A90)

  • State pool account interest

    State pool account interest

    When a state pool account has an overnight credit balance, interest accrues on the account, and is paid periodically by the Reserve Bank of Australia (RBA) to the state or territory account holder. Several options are available to the state or territory for the payment of this interest – if the interest is paid into the pool account, it can be used as a component of state funding.